Myanmar government figures for the latest financial year have been released and essentially it’s more of the same.
Gas sales to Thailand amounted to about US$2.38 billion, a slight drop on last year’s $2.53 billion, and continued to be by far the largest export earner. However, the volume exported dropped sharply from 516 billion cubic feet to 377 billion cubic feet, or about 1033 million cubic feet a day. That’s roughly one-third of Thailand’s total demand.
Total exports rose slightly, to about $6.8 billion, up from $6.4 billion, while imports rose about 33 percent, to $4.6 billion.
Most of Myanmar’s imports came from China (26.5 percent), Singapore (23 percent), Thailand (8.6 percent), Malaysia (7.9 percent) and Indonesia (4.6 percent).
The majority of exports went to Thailand (38.7 percent, mainly natural gas), Singapore (12.5 percent), India (11.9 percent, mainly beans and pulses), Hong Kong (9.8 percent) and China (9.1 percent).
In Myanmar, the financial year begins on April 1 and ends on March 31, so these are for the 2008-2009 financial year.
Note these are all provisional figures, from the government’s big red book (also known as Selected Monthly Economic Indicators, which is released by the Central Statistical Organization). You should be able to find these figures somewhere on the Ministry of Commerce website in Myanmar or English but I’m not exactly sure where.
Now comes the interesting part. The US dollar amounts are arrived at by extrapolating the Myanmar kyat figure by the official exchange rate. The official exchange rate has not been adjusted since the 1970s, as I understand it, and is about 200 times lower than the market rate.
For example, gas sales in 2008-2009 earned just short of K13 billion. At the average official exchange rate last fiscal year – K5.45 to $1 – you get the actual amount Thailand paid, about $2.38 billion.
If you use the unofficial, or market, exchange rate, of about K1200 to $1, you get the amount that gas sales actually contribute to the national budget – about $10.8 million.
Here’s how economist and Myanmar expert Sean Turnell, from Macquarie University, explained it in The Irrawaddy last year: “Recorded at the official rate, Burma’s gas earnings for 2006/07 of $1.25 billion translate into 7.5 billion kyat, or a mere 0.6 percent of budget receipts. By contrast, if the same US dollar earnings are recorded at the market exchange rate, their contribution of 1,500 billion kyat would more than double total state receipts, and more or less eliminate Burma’s fiscal deficit.”
Where did the “missing” $2.37 billion go? Well, it’s likely that a significant proportion of it never entered the country and is probably now floating around in bank accounts in Asia and the Middle East. Some is also used to finance expensive public works projects, like building the new capital, Naypyidaw.
This has a serious impact on the lives of ordinary people in two ways. The most obvious is that this money could be better spent elsewhere, like on health and education services, which are criminally underfunded.
But it also means that the government operates a serious budget shortfall. To meet this shortfall the central bank simply print a whole load of new local currency, which is one reason why Myanmar suffers from such high inflation.
The consumer price index figures also make for sad reading. The figures show a 22.5 percent rise in the CPI in the 2008-09 financial year, with the largest increase coming in May, after Cyclone Nargis hit and food prices skyrocketed, pushing the CPI up 4.15 percent in that month alone.
In the last four months of the fiscal year — December 2008 to March 2009 — the country actually experienced deflation of 3.84 percent, largely due to lower food prices.
But to give you some idea of just how bad inflation here is, the official figures use 1997 CPI as base, or 100. By the end of March 2009, CPI was 946.5, or nearly 9.5 times 1997 levels.
Foreign direct investment in 2008-2009 was about $985 billion, with only five investments made. Of that, $856 million was for China Non-Ferrous Metal Group’s (CNMC) ferro-nickel mine at Tagaungtaung, in Mandalay Division.
Three investments were made in the oil and gas sector, all in September 2008. Russia’s Nobel Oil signed two contracts with the government that were collectively worth $94 million. Worringly, one of the areas covered under the contracts is the Hukawng Valley region, which is home to the world’s largest tiger reserve.
Also in September, Petrovietnam and Vietsovpetro, a joint venture between Petrovietnam and Russia’s JSC Zarubezhneft Itera Oil and Gas, signed a $20-million contract with MOGE to explore in an offshore area.
Finally, in January 2009, a Thai company invested $15 million in the tourism sector but I’m unsure as to the exact project.
I should mention, as Derek Tonkins pointed out on Mizzima a few weeks ago, that this only represents “investments licensed by the Myanmar Investment Commission (MIC) set up under the 1988 Foreign Investment Law (FIL)”. Investments in smaller projects are unlikely to go through MIC.
I was surprised to see an article in the Myanmar Times on Monday about the proposed introduction of a “Special Economic Zone” law, which is apparently in its 10th draft and “is currently being considered for implementation … [by ] the upper reaches of the Myanmar government”.
Apparently investors from China, Malaysia and Thailand are waiting for the law before making investment. If anyone knows more about this it would be great if they could comment.
The Myanmar Times article was also interesting as it was quite critical of government policy, listing “inconsistency of rules and regulations in banking, trade and investment, the dual exchange rate policy, double taxation policy, a high inflation rate and lack of transparency in the private and public sectors” as hindering investment here, in addition to Western economic sanctions. Not the kind of stuff you usually see in the local press.
I expect FDI to rise significantly over the next few years as two Chinese projects are implemented – the 16,500MW hydropower project near Myitkyina and CNPC’s $2.5 billion oil and gas pipeline project. Also, South Korean firm Daewoo International will begin developing the Shwe gas field, off Rakhine State.
The government actually keeps quite detailed statistics — you can argue over their accuracy — down to how many cotton longyis (male) were produced in government factories (456,000) and how many passengers traveled on private buses in Yangon city (708 million) between April 2008 and March 2009.
Other statistics show:
Tourist arrivals fell 11.5 percent, to 255,280 people
Refined oil imports rose 58 percent, to $585.6 million
Jade production rose 63 percent, to almost 33 million kilograms
Revenue from taxes rose 18 percent, to about $823 million ($1=K1200)